Jane Belinda Saranga_CASE 2.1-2.3

MANAGEMENT CONTROL SYSTEMS NAMA

: Jane Belinda Saranga

NIM

: 1101002009

CASES 2-1 – 2-3

CASE 2-1 Encyclopedia Britannica Inc.(A) 1. Describe the strategy and tactics of EBI as of 1990. Describe the strategy and tactics of EBI as of 1990. Answer: In 1989, EBI began to move even further into the electronic world by publishing Compton's encyclopedia on CD. Previously, EBI only offer electronic or digital version of the product to business users Lexis-Nexis to cooperate in the improvement of information services, and refuse to offer its products to non-business users such as schools, libraries, and the users with individual interests. But this time, EBI to expand its market share by making our schools and libraries as the main target. In carrying out the strategy and tactics of his company, EBI using marketing strategies from door to door (door to door), talk to the whole person or family, then attempt to influence or encourage them to invest in the Encyclopedia Britannica which is the storehouse of all science. Until finally in 1990, EBI is able to increase sales by 650 million dollars. The main key sales point is the existence of a special stamp or seal attached to the EBI that raise the value of selling the product. Many parents who believe that once they provide this encyclopedia at home, they have given the advantage of knowledge is important for her children at school and in life to come. In addition, 32 other EBI device successfully become an inspiration or a standard encyclopedia in the world, which means the EBI has been a market leader that is able to determine marketplace quality standards. 2. Why was EBI's business model so successful for more than 200 years?Why EBI's business model was so successful for more than 200 years? Answer: Because EBI has a competitive advantage, so they can maintain well what they have accepted. Thus, EBI always make a new innovation. First, hires several notable scientist and

scholars. This will make the EBI trust worthy and authoritative like their brand representative. Then EBI try to enter the digital age when it offered an electronic version to business users of Lexis-Nexis, an information retrieval service of Mead Data Central. Then, the company moved further into the electronic age when it published Compton’s Encyclopedia on CD. Even they moved door to door, talking with individuals and families, persuading them to invest in EBI’s voluminous storehouse of knowledge. In every strategies, EBI has a clearly target, so they can be more focus to reach their target. 3. How vulnerable was this model in the early 1990’s? Answer: During the early 1990’s, the software giant Microsoft decided to enter the encyclopedia market. Microsoft licensed material from Funk and Wagnalls Encyclopedia which sold its sets in supermarkets, added some public-domain content, and released it on CD-ROM in 1993. WhereasEBI still in their electronic age, even EBI is still moved door to door,talking with individuals and families, persuading them to invest. This is so vulnerable, because if EBI doesn’t make a “breakthrough”, Microsoft will take over their market as a premiere source of knowledge. 4. Should EBI respond to Microsoft’s moves ? If so how should EBI respond ? Why? Answer: Yes, EBI should respond to Microsoft moves. EBI should do the industry analysis or solely competitor analysis. EBI should think about innovationagain so their market still can be reached. EBI should respond to Microsoft’s moves if it wants to be a leader in encyclopedia market. During 1990’s , microft decided to enter the encyclopedia market. It licensed material from Funk & Wagnalls Encyclopedia which sold its sets in supermarkets, added some public domain content and released it on CD- ROM in 19993 and sold for just $ 100 as against encyclopedia’s $750. EBI can respond to Microsoft by price wars and reducing its price and bringing it in comparison to microsoft’s price. It also needs to show the society how encyclopedia is different from Encarta and bring out its USP to the society. 5. What control systems would you recommend for EBI so that the company can understand the potential for transforming its business model? Answer: As we know that there are four control systems: 1. A detector A device that measures what is actually happening in the process being controlled.

2. An assessor A device that determines the significance of what is actually happening by comparing it with some standard or expectation of what should happen. 3. An effectors A device (often called “feedback”) that alters behavior if the assessors indicate the need to do so. 4. A communication network Devices that transmit information between the detector and the assessors and between the assessors and the effectors. EBI should have at least these four elements to understand the potential for transforming its business model.

CASE 2-2 Encyclopedia Britannica Inc.(B) 1.

How effective was EBI’s response to the threat of the digital revolution? Answer: EBI’s response to the digital revolution was not at all effective. EBI responded by:   

selling its comptons unit for $57 million publishing the entire text of encyclopedia on a 2 CD set and offering 3 yr 2 workstation license to businesses only for $2100 making no changes in the consumer market

EBI created the encyclopedia CD rom for the consumer market. The company offered the CD free to consumers who bought the print set ( which cost Britannica at $200-$300 to produce compared to $1.50 for a CD ROM ) however the company charged $ 995 if the customer wanted just the CD but still annual sales and revenues continues to slide. Britannica was available online to university faculty and students at a price of $2000 per year but the moderate families opted for the less expensive Microsoft CDs. Thus EBI’s response was ineffective . 2. What strategy should Jacob Safra follow to get EBI back on track? Answer: EBI can be brought back on track by reducing the subscription fees . It also needs to change its model and bring about bundle pricing i.e offer a lower price when multiple items are bundled together. A subscription base pricing where an annual fee for unlimited access is charged can also be incorporated. It can also incorporate a strategy where base product is free

but advanced products are charged. Time base pricing is another technique that can be incorporated. Also Britannica should go for a site offering selective search engine targeting high quality web sites.All these efforts can bring back Britannica back on track. 3. What would be your recommendation for control systems for EBI? Answer: Britannica should go for a site offering selective search engine targeting high quality web sites and make make buying and selling of books on electronic media very simple. It also needs to change its model and bring about bundle pricing i.e offer a lower price when multiple items are bundled together. A subscription base pricing where an annual fee for unlimted access is charged can also be incorporated. It can also incorporate a strategy where base product is free but advanced products are charged. Time base pricing is another technique that can be incorporated. It also needs to go for online/digital advertising to increase its sales .

CASE 2-3 Encyclopedia Britannica Inc.(C) 1. Evaluate EBI’s Internet Strategy and tactics. Answer: EBI launched a new internet service at www.britannica.com. It included the following 5 pricing models on the internet:     

a.

Subscription based pricing : Charge an annual fee for unlimited access Metered ricing : Charge based on time spent using the encyclopedia Fees for services : Charge for any research or special reports requested Product line pricing : base product is free but charge subscription fee for the advanced products Bundle pricing : Offer a lower price when multiple items are bundled together. The general lack of control was caused because they failed to do a feed farward control to anticipate what would happened to the website in the event that visitor would amount of the numbers it did. There were two people responsible for this; one was the chief executive Don Yaniass for not controlling and anticipating the critical control points of the company and being too slow to incorporate Britannica into an online world. If he would have done this , perhaps the amount of people visiting the website would have

gradually increased allowing the technical supporters of the site to concurrently fix the problems that he site might have had. When they finally did incorporate themselves , it had been so anticipated by people that they all bombarded a site that was not prepare to handle this kind of crowd because when they designed the site there was no precise emphasis on timeliness among other things. Also the chiefs technical officer did not make the proper arrangements to ensure get better grades that the website would be prepared in the event of a situation like this, so he also is to blame. Britannica applied a feedback control as there first attempt at the website failed. They redesigned their website making sure that a crash would not occur again. The website was 2 to 10 times faster than be for which was able to withstand a surge of people and still function properly. They understood the economic feasibility of outsourcing. This would be more costly, but it obviously weighed against the benefits. The new website this time applied a feed forward approach by not only making the website more efficient to the amount of people who were visiting presently, but it made it powerful enough to handle a bigger crowd , like in the case of the Supperball where the site functioned to perfection. The website was timely, accurate, the chief executives accepted that the control was needed integrating the performance with the needs. They did not seem to lack anything.

b.

c.

2. Are there lessons from the EBI saga that are relevant to brick and mortar companies? Answer: Yes there are many lessons that are rekevant:    

protection of the business units market share and competitive position. updating the business with the latest trends in the industry. proper industry analysis need to be done such as intensity of rivalry among existing comopetitiors, threat from substitutes , threat from new entry etc. transform the business model depending on the needs and trends in the technology.